From mining and processing to production and recycling, the Silver State is going all in on the lithium-ion battery cycle
By Scott King, June 21, 2023
The state of Nevada is already a starting and ending point for lithium batteries, both as the largest source of lithium in North America and as one of many end-user markets for electric vehicles. But it’s the “missing middle,” or the processing and recycling of critical minerals into batteries, that is drawing major investments from the federal government to support research and development efforts of companies seeking to “close the loop” in the emerging battery economy.
“The biggest challenge that we’ve had is the processing side of things, where you take these elements and you process and put them together into batteries,” said Bob Potts, deputy director of the Nevada Governor’s Office of Economic Development. “We had everything from the extractive side on mining, all the way to the final demand of auto manufacturing. It was the ‘missing middle’ and it’s not [just] taking the raw materials to be extracted but it’s on the recycling side, which brings in a whole other side of opportunity for us.”
These new opportunities are garnering the attention of federal agencies looking to shore up domestic battery production.
In 2022 alone, billions of dollars made available through passage of the Bipartisan Infrastructure Law and the Inflation Reduction Act are making their way to Nevada companies to help fill the “missing middle” in two parallel ways: critical mineral processing and battery recycling. The Department of Energy (DOE) has provided $2 billion to Redwood Materials, a Carson City-based company developing a process of recycling used batteries and refining their components to make new ones. Another $700 million came from the DOE to support development of Ioneer’s Rhyolite Ridge lithium and boron mining and processing facility in Esmeralda County.
Additional investments were made in startups as well. The DOE provided a $115 million grant to Reno-based American Battery Technology Company to build a battery manufacturing plant. Lilac Solutions was selected by the DOE to negotiate a $50 million grant to develop a lithium manufacturing plant in Fernley, NV.
“The U.S. has a very low capacity to actually make these critical materials domestically and Congress authorized these funds to help build up this capacity,” said Ryan Melsert, CEO of American Battery Technology Company. “The goal of [the grants] is to take these technologies that are already proven at the laboratory and to now build commercial-scale facilities that will operate and produce these critical materials domestically.”
The current lithium manufacturing process relies heavily on foreign countries, which poses its own national security, energy and economic risks. Melsert said that demonstrates the importance of developing a domestic supply chain for critical minerals.
“For many existing legacy lithium projects, they actually have the lithium resource and lithium refineries on different continents,” Melsert said. “[We’re] recovering material in West Africa, Australia, or South America and then shipping those concentrates mostly to Asia – to China – to have them refined into battery-grade products. That’s a large amount of cost and environmental impact to have those facilities so far away from each other.”
But as the largest source of lithium deposits in North America, Nevada poses a suitable destination for companies like American Battery Technology Company to develop their critical mineral processing and battery recycling operations.
“[Nevada] is one of the only places in the world where this type of lithium-bearing claystone exists,” Melsert said. “[At] our plant near Tonopah, we’re directly building a refinery right at the site of our resource where we don’t have to ship materials across the world and we’re able to make those homegrown products right here in the state. So it does make a big impact on keeping costs low and keeping environmental impact low.”
However, these types of projects come with their own set of challenges. Critical mineral mining, processing and recycling projects are subject to environmental law and can be subject to litigation, such as the recently successful listing of the Tiehm’s Buckwheat under the Endangered Species Act. Advocates for the rare Nevada plant say that if Ioneer’s Rhyolite Ridge project were to move forward, the Tiehm’s Buckweat would face extinction.
Projects are also subject to tribal protests and lawsuits, such as those staged by the Fort McDermitt Paiute and Shoshone Tribes, Pyramid Lake Paiute Tribe, Reno-Sparks Indian Colony and the Oglala Sioux Tribe against the Thacker Pass Project being constructed by the Lithium Nevada Corporation. The tribes and other protest groups say the project would not only endanger endemic species and contaminate water resources, but also desecrate the culturally-significant massacre site of 31 Paiutes by federal soldiers during the Civil War.
Advocates are also pushing for reforms to what they say is an outdated and flawed Mining Law of 1872 – which prioritizes mining over all land uses for America’s public lands and comes at the expense of natural landscapes, Indigenous sites and leaves tax revenue on the table.
Despite these incessant challenges, federal investments in these projects continue to demonstrate the federal government’s commitment to helping Nevada emerge as a leader in the battery economy.
“A huge amount of credit needs to go to the support of the federal government,” Potts said. “So much of what we’re doing in this space is startups. There’s no way they have the capital backing to do these kinds of things, so our investment in the form of tax abatements is huge.”
Tax abatements are not new, but as of late they have been a strategic tool used by the state to further support this growing industry. Redwood Materials received over $105 million in tax abatements. Sparks NV, LLC, received nearly $2.5 million in tax abatements to expand its closed-loop recycling and manufacturing operation in Storey County. Earlier this year, Tesla received over $330 million in tax abatements to expand its Gigafactory complex into two new factories – a battery cell factory for light duty vehicles and another for fully electric semi trucks. The 2023 Tesla tax abatement deal comes after the company previously received $1.3 billion in tax abatements from the state in 2014.
“If we didn’t have those abatements to help these companies locate to Nevada, they would go someplace else and we would lose all of the activity that they generate off of that [abatement], because of their entire supply chains and the industry as a whole,” Potts said. “[But this opportunity] started because we were a lithium standard on the extractive side.”
Tax abatements, however, may not be a cure-all solution for developing a critical mineral and battery economy in the state.
A North Carolina State University study analyzed financial incentive tools, like tax credits and abatements, offered by state governments across 32 states from 1990 to 2015. Published in 2020, the study’s conclusion stated that, “while financial incentives may have an economic return on investment, they come with a high cost to the state’s financial sustainability. As such, they are a financial tool that states should only use with caution.”
Giving away too much in tax credits and abatements is possible. According to the study, these financial incentives require minimal budgetary approval and political scrutiny. Consequently, tax credits and abatements can have a negative effect on a state’s fiscal health by, “artificially limiting its resources to provide services and to balance its future obligations, but it also does so while not adjusting its budget to compensate.”
As such, more oversight in the tax abatement procedure and process may be needed.
This is an argument similarly presented by Nevada State Sen. Dina Neal, who introduced Senate Bill 394 to the State Legislature as an attempt to reign in the Governor’s Office of Economic Development (GOED) from unilaterally giving away indeterminate sums in tax abatements. Sen. Neal said SB 394 was meant to spark new conversations about the tax abatement procedure after the Assembly Revenue Committee was largely left on the sidelines while the GOED gave away the $330 million in tax abatements to Tesla in March.
Potts, however, stressed that tax abatements are a particularly influential factor in supporting this budding industry.
“[Tax abatements are] a reduction in taxes, not an exemption from taxes,” Potts said. “With an industry like this, the economic impacts tend to be very large, because the more we build [the supply chain] here, the more that you can have a cohesive supply chain. For Redwood, for every dollar tax abated, we get $2.44 back and that’s only during the abatement period. When the abatement period is over [the state] gets 100%.”
While lithium tends to garner the most attention, the battery economy relies on a broad swath of other critical minerals that need to be extracted, processed and refined to make these batteries operational.
“It’s been tagged as the ‘lithium loop,’ but it’s much more than just a loop within lithium,” Potts said. “It has a broader reach and ties into other comparative advantages that the state of Nevada has. There’s a lot of other rare earth materials like nickel, cobalt, cadmium and molybdenum, and a whole bunch of other ones. We have copper, which is a big deal, especially when you’re in the electric space.”
That’s why Congress is continuing to look for ways to support the critical mineral economy, as Rep. Raul M. Grijalva (D-Ariz.) introduced The Clean Energy Minerals Reform Act that will modernize and reform the Mining Law of 1872. The Clean Energy Minerals Reform Act would institute a series of changes such as establishing royalty payments to taxpayers for mining operations on public lands, setting new environmental standards for mining-related activities and requiring meaningful consultation of mining projects with tribes.
Nevada officials are seeking to capitalize on the time, attention and investments being made in its state for developing the domestic battery and critical mineral supply chain. They believe that their support for the critical mineral processing and battery recycling industries will better support the foundation of what may be an even bigger economic opportunity for the state: energy storage.
“This is the energy storage space, it’s not the energy generation space,” Potts said. “All the research and development that comes out of this lithium ion is going to have a lifecycle to it. But if we are ground zero for the whole energy storage space, we’ll also be home base if we stay in front of this for what the next generations of energy storage should look like as well.”
That’s why despite the surrounding controversies, the federal government’s investments in the state make clear that Nevada is well-positioned to indefinitely meet the nation’s energy demands by plugging the supply chain gaps and closing the lithium loop. The importance of supporting this industry, Potts said, comes back to developing a domestic supply chain that is independent of foreign players.
“Energy security is national security,” Potts said. “We realized that when Germany ran into trouble with the Russian invasion into Ukraine because all of their energy flows in from Russia. If all of our technology pivots on whether or not China processes our rare earth materials, that could be a huge security issue.”
Published by Sierra Nevada Ally.